Take care before cashing old check

Cleaning up paperwork last week, the last thing I expected to find was money.

Yet stuck amid some papers, horribly misplaced, was 40 bucks.

Kind of. It was a check, written to me last January that I somehow neglected to cash.

I told my wife about it, and she said "It's found money, we can have some fun with it," but I had to rain on the celebration, because this kind of windfall frequently comes with a major problem, usually in the form of phrases like "Void after 90 days."

I hear from people all the time who unearthed old, uncashed checks when cleaning up an estate or going through clutter at home, I have talked to countless corporate accounting honchos who complain about small dividend checks that go unprocessed for years. Plenty of parents and grandparents have seen their bank statements messed up by a gift check or baby-sitting payment that is held for months without being cashed. Likewise, a lot of small-dollar product rebate checks or minute class-action suit payouts - checks for pennies or a few dollars - are never deposited.

Once a check gets stale, what happens next varies.

The range of possible outcomes for my $40 windfall, for example, range from no problems and money in the bank to having the check rejected. That can lead to a "returned check" charge (which can run to $40) even though the check was not turned down due to insufficient funds.

The real problem is that it's almost impossible for the person with the stale check to know how it will play out.

Some businesses vigorously stick to a void date printed on the check, others just use it as a guideline. Some banks would notice the date if the check was being cashed - and might decline to put it through - but could accept the check deposited through an ATM, at which point it might still be declined.

With bank and corporate mergers, even longtime business accounts sometimes get new routing numbers or account digits, a change that effectively voids all outdated checks, even if the issuer would otherwise be happy to pay the debt.

The Uniform Commercial Code, which applies in most states, says that a bank is not obligated to cash a check more than six months after it was written.

But the Federal Reserve doesn't actually have a policy on stale checks, with officials acknowledging that the protocol can vary by bank, by account or even by the individuals who randomly wind up handling the transaction.

Bankers typically don't like to discuss their policy because they know how easily something can slip through, and because they know that a demanding customer might want them to hold tight to "void after 90 days" even when the bank typically considers checks to be good for a year. In fact, most bankers I talked to typically said that they assume the check writer would want to make good on the paper for at least a year; if the check has time limits written on its face, it may simply mean the issuer is trying to keep the books as up-to-date as possible, more a guideline than a hard rule.

Some banks flag old checks and run it past the issuer before completing the payment. That routine precaution adds to the time it takes an old check to clear but it usually won't stop payment.

That's because allowing a check go stale does not cancel the debt.

Consider a check stale and potentially problematic after six months and a real threat for rejection after a year.

Experts suggest breaking stale checks into three categories based on your likelihood of collecting: "definites" represent government checks, "maybes" include corporate and business checks, and "unlikelies" are outdated personal checks - and maybe those rebate/claim payouts - more than a year old.

Along with finding your own bank's policy - and most will waive the fee if they suggest putting a check through and it gets rejected - you can also contact the issuer. With a business check, the issuer will typically tell you to shred your check as it will reissue a new one - that's what happened with my $40 bounty - or will avoid the hassle and tell you to put the check through as-is.

If you are handling a personal check, where the one-year rule-of-thumb almost certainly applies, a quick call to the writer making sure there hasn't been a change to the account (with an apology for being forgetful) should do the trick.

But if your stale check is for a small amount and the issuer is hard to track down - like a rebate company or a class-action payer, where accounts may have been established just to deal with one mass mailing - giving up may be the best course of action. With penalties typically running between $15 and $25 and sometimes reaching $35, there is a real risk to processing the stale $3 rebate check from some item you bought in 2003.

In those cases, check with your bank manager, who may agree to put the check through and waive the fees you're a good customer.

"If the check goes stale, the issuer should still owe you the money, it's just harder to collect, and you have to decide if it's worth the effort," said Brian Egan, senior vice president at the Federal Reserve Bank of Atlanta. "At the very least, I'd see what my bank says, and then maybe contact the issuer to say 'I'm going to cash it, are you still going to honor it.' It may take some extra effort and caution, but you should be able to get your money out of a check like this."